tv Making Money With Charles Payne FOX Business March 17, 2021 2:00pm-3:00pm EDT
of the hour. i think it could make or break his legacy as chairman and all of that and so much more on making money so right now let's go to washington dc everyone prayed live with the decision edward. >> coming out with her decision about three or two seconds and one now if i'm going to take the federal reserve leaves all of his tools to support the economy in the state leaving the right where they are the moments in the treasuries at $1,120,000,000,000 per month and one major change is this. following in moderation in the case of recovery, indicators of economic activity and employment has turned up recently although the sectors must affected by the pandemic remains weak. and when inflation continues to read below the 2 percent but what was removed from this statement was this like a malign saying that we can demand is decline in oil prices have been holding down consumer price inflation so that line is gone. the federal reserve gives gdp
growth at 6.5 percent this year. and it going at a 3.3 percent by the end of next year and inflation estimates have been raised significantly to 2.4 percent for this year from 1.8 percent from last december and now inflation went up in the projection of 1.8 percent in january - 2.2 percent now is what they believe the inflation is coming back down to the 2 percent target in 2022. now on unemployment they see the unemployment rate ending at 4.5 percent following to 3.9 percent in 2022 in the dropping again by the end of 2023. to the three have percent of the fed into space and no change in the federal planet rate if you look at the data through 2023, and if you look at that same plot, there are four members that see liftoff of reason 2022 that number goes up to seven members that liftoff in 2023 but again, the bottom line here is
nothing is changing the federal reserve but they do believe inflation will spike. charles: thank you very very much. there's a lot to take in and unpack this will be a crazy hour so let's get started right now. my favorite pros, manager and ceo is with us, bob ceo of financial and company and a managing director michelle predict the me to start with everyone this is what you are expecting. phil. >> without a doubt, he's gotta make sure the market is prepared for slightly higher rate than we are having real rates are any higher in this what i thought he said, make sure the obvious wooden flight and i things are going to spike and come back to normal to the market. we wanted to your specifically going to say in his narrative that were going to continue doing what we are doing because inflation is still intact as to where they wanted to be.
>> michelle. >> i would agree with aspirated i was hoping that we would hear something about the yield specifically on the spike. but apparently he kind of sidestepped it by talking about his inflation expectations and the cost of inflation which was higher than what he had originally said. so i don't whether or not the market will continue to like what he said because he didn't address anything about field operations or whether he will move the feds rates which is right now hovering near zero. so noise takes about 20 minutes to half an hour if not an hour for the market to digest what happened at these meetings. charles: i actually tell people don't even worry about the two hours after this meeting, look to the next day and once we've digested it for anything between what we see so far and what were going to hear momentarily, maybe some of these? 's that's on everyone's heads, my be addressed and certainly we can see the markets react to them. it was in their homes missing from your vantage point rated.
>> i think your point charles, were going to be hearing from the chairman over the next 30 or 40 that's just the statement we are getting that from. i think that the narrative is the continual narrative that this will be transitory, nothing to worry about. we'll see inflation spikes, let's remember that we have 3.5 percent unemployment not too long ago we cannot get past 2 percent inflation. were going to get the sugar high in the feds preparing for that but they're also trying to tell us that they think things will be back to normal in two years in the let it run hot for little bit of time. something meanwhile the markets okay with that but the scene with say. >> the markets are okay but obviously felt, not everyone is saying this like what you are pretty what you think that powell shall say, there's would be questions about the same things like yield caps, i don't know if anybody will bring up negative rates the slr exemption there that happens on march 31st right around the corner and there certain things and you can do and say before
this hour is over two swayed to some of the things of this anxiety of what are some things and he will probably do. >> is going to hopefully recognizing inflation is happening. and you will be the price of gasoline. he's going to have to be very clear about his mandate, it is going to be less a little bit of inflation happen to go back to the norms of what we saw pre- pandemic and then they're going to be in control let this run not for a while to try to get an employment to the number is going to meet the political demand this and the economic demands. that's where this gets slippery because there's real risk of going higher, were never slow down the bond purchasing at the end of this year and that's where the first time if it is going have to step up and do think that they have not end before pretty yet to be very careful to say that we recognize it were okay with it and were going to manage through it is the year goes on. charles: he might be okay with that part of a wall street has not been okay with it.
let zero in on the nasdaq which is been hardest hit by a particular deep bottom yield slides. two things michelle, has a reaction to some of these five flyers been justified and what else could be happening. i mean, is there something else going on in the world and these mega- cap growth that is come down to earth because the hills of ghana but also when you look back in history, other things were happening where we didn't mention too much. it michele schneider. >> there's a few things charles, whenever one that like you mentioned the obvious. but i'll also the aspect and all the big tech stuff has been in a huge run particular last year during the pandemic. so to the point now where they've just run out of things that they've gotten over the value to freighted that would make sense as we have seen the rotation rate even more into the value stocks and small caps in transportation and retail. so this could be a major shift that is happening. what you do not want to see his
big tech to fall apart completely than the other factor is that semi conductor shortage, the tip shortage which is impacting some companies like apple for example that already announced their reducing the number of phones are making because of the chp shortage which comes out of taiwan from the environmental factors. so those are two factors the other one is how much can a big tech companies divest to get other things like electric cars for example. as we both talked about doing our health or in facebook case, they may have been getting the vaccines out. charles: it is ironic in a way because i don't know that the actual missing is this shortage of chips the terms and semi conductors rob, he feels like the opposite, narrative down the moving so quickly to make up for it nothing will have a glut and i will keep prices down. overall, as we had a few moments to digest this move, and again from the headlines there is
nothing earth shattering per se. i think the idea that the fed acknowledges that inflation will be hot for this year and before 2.2 percent but they see it going down next year as the feds way of saying this is transitory. powell will send that over and over again. jerome powell. but how do you reconcile that in this market rob pretty to. >> good question i think it is transitory charles pretty were going to opening coming back up and that's going to be a sugar high organelle of the stimulus checks into the hands of consumers. the stimulus checks are not to when he get's through two or three years that is why they see ddp going back to 2 percent and when you see that comments are going to be the industrial and is not going to be the utility, that are getting that 20 percent topline growth is going to be technology selector other dissent, technology got maybe a little bit ahead of itself and technically we've consolidated and it looks good but most are what you going to have to rotate back into and for the market to go up with such a big
allocations of technology, you need them to participate so investors or maybe on all of the on the other side now in these dividend paying's coming might want to use these pullbacks to buy some of the growth things that we will need to lead us in the future. charles: part of that conversation of course is that you get out in front and the mega growth and you search for value. this is something i've been trying to hit on the show because it's one of these words, value, what is it mean. it's interchangeable sometimes it means cheap and sometimes a means inexpensive, so phil, let me go to you on the scope expect to the office what this value really mean. is it how the sector fits into its own parameters of evaluation of particular time or executor industry how do you just know where the value is right now. people looking for safety. phil: first of all inexpensive. but the issue on value orientation two different things printed on the orientation means go by the names you know, the
hotel you have to say operated the airline you like to fly the restaurant chains if you like to go through. the reason why that is where people are going to the money, value orientation is going be where . [inaudible]. charles: kobe stop you one second. these have already got up there, we saw lot of rockets an all-time high that one year concert so at one point will say okay, the market is assumed we will reopen and assume going to go back to concert maybe is overdone. >> e-filing and here's why. things just the beginning freighted with regrowth decade with value stocks had been going on for ten years and if we go through prolonged economic incentive as we get back to the unemployment rate, you're looking at current levels. but what if we have real expansions, what if we get real lending, what if we see real explosive travel around the world for you and think it's the beginning of it. the cruise line stocks that are to do think about the homebuilders another do, they
will blitz and starts but on the chance for value to reinvigorate because of the spending and the consumers, here is your opportunity. charles: i don't know think it will rocket between now and the rest of your notice corporate earnings and no one is talking about them anymore. while everyone knows that there sort of crunching the numbers and clutching, reminding investors and earnings are the mother's milk of the stock markets. there are now modeling for basically the second quickest recovery to acquire since 1970. and i see that happening between now and march of 2022. i think this is phenomenal come the recently completed earnings season where you saw first and second quarter earnings going through the ceiling freighted so michele schneider how much is that playing a role in keeping him comfortable in all these pickups and also helping find new ideas. >> will earnings is definitely a factor but to me earnings are really secondary to how they performed versus the expectation. and if the expectation gets too
lofty in the numbers disappoint, that would actually create another pickup. so i don't really necessarily trade off of the anticipation of earnings you are much more interested in going back to the value place. based on good balance sheets companies that have have expansions pretty 33 printing so those so i'm looking at it and earnings to me is sort of a lagging indicator than a leading indicator. charles: all right, thank you guys pretty then gals pretty amazing stuff this the kind of conversation we need to have on a day like this. he comes back in a moment though as the fed will, we will have to work overtime today. the valley company and anytime from here on out the strong economic data to convince investors that they can still keep rates low. now this the white house working in every angle to make taxes higher. so what would happen, imagine if we had his with a wave after
wave of new taxes and higher interest rates. wandering the university economist in for his thoughts. peter, the new taxes are going to be some plastic and they're going to come from every angle and at some point the fed is going have to raise the rates. those are two serious things for the economy. peter: absolutely in the fed after raise rates and have to go up on their own if they don't buy bonds at $3 trillion a year pretty were facing another $3 trillion this year and likely to have trillion next year. at that pace 120 billion a month does not cut it. but the treasury rate goes up rated that is not going to be good for the market once we get up around three or three have percent on the treasury. if you can of this. that is really important. the biggest problem is the tax increases will really stifle the growth in the high-tech sector. but the biden administration doesn't understand is that we have been financing high-tech on
the back of the capitol gains tax. in the years federal support for high-tech is been been declining while it is been rising in china. the government support. but when we committed people to do is to create startups and get big paydays when heavy ipos and then below tax, that is how we subsidize high-tech and how we subsidize our r&d and subsidize innovation and before you know what about equity peter, is that fair and it is absolutely fair because of the only way we can compete with the chinese. do not give them assorted and then a jackknife, we need to continue in the tax structure we have. but the white house there's still focus on auditions in the 1980s. charles: that's an amazing point i'm glad glad you brought that up. i want america to be information technology hub of the world and particularly as it moves more things even on the defense side. one thing i have learned with recently passed biden rescue plan is that now there's going to be a tax on companies with
executives have already the executives are making more than a million dollars a year. it is restrictive to five and then they moved it to tan and according to the cbo's, or talking about almost $8 billion over the next decade. the first is going be used to pay off new - i got a couple of problems that you can help me with here. one, how does the government to get to dictate how ceos are paid to be, how can that same government take money from private companies and payoff union pensions. >> it is simple, when you use the remaining economy in 1988 value or manual, and you put the money like that in charge of the council of economic advisories, believes that kind of stuff you have to look at all of these cabinets and appointees that have been going into the administration. there mother's milk is that we should run this place someone of the way that france does prevent consent friends, and the five current members of the security council, who did not develop a
vaccine and who cannot even get a vaccine out right now. it is france. essentially, they want to use the european playbook which is given us what you are up these days to run america. i have part of this conversation today in preparation that the tax rates. you realize the highest taxes are in new york city, that if you make a reasonable amount of money, lower than any major cities in europe. if we move in that direction, and were going to get french innovation were going to get romanian poverty for a working class. charles: so we know that janet yellen has been talking about gathering up with the rest of the world somehow designating the sort of global tax rate, corporate tax rate. in an effort to stop american comedies from playing. should the foreign nations be able to have a role in where our taxes are and why would place like ireland feel that their golden goose by changing their
tax policies because there's been major beneficiaries of any time we spike up our corporate taxes. peter: part of the problem the administration things is going to accomplish diplomacy for everybody to do the same thing. our corporate taxes are not low. if you look at corporate taxes across the range, of industrialized countries, ireland is particularly well but i doubt he's going to be able to get a conference together to get the iris to brace their taxes anymore than he is going to get the germans together on arm board with the notion that they should then 5g from china for you because the germans are too concerned about their exports. but what mr. biden is going to learn and cease going to take them a couple of years is that he's going to have to make policies of the united states in terms of what other people are already doing in this self-interest. i hate to wish for this is middle-class trade policy is middle-class economic policy, it's going to converge on america first. simply because that is where the world is.
we have to deal with the world as it is. not as liberal economists propose it should be on the black board. the classrooms in the days upon the charles weber. charles: yes and it all look so good in college right, the whole socialism is fair and all of that stuff buried in her life though, it's a whole lot different. , great points about history and how bad it could be. thank you a lot printed will see you soon. peter: it is great to see you all again. charles: . more history here, federal reserve was created through the federal reserve act of 1913. here's the thing, they promised it was moved out the economic cycle and stop the panic that wrecked havoc on the 18 hundreds in our country number four personal panics and other first big test came when the dow jones industrial average crashed in 1929. remember october 20th of the lot like money down 13 percent in october 29, but today down
full presented by the name in november the annexes off, 50 percent. so they sprung into action from the fence did and they referred to the act and said okay, we should be gone and will the board of governors stated that the fed at the time believe the stock market speculation the resources from productive uses like commerce and industry so they would not contemplate the use of their banks with the creation or even that would give them credit pretty did so they taught and tightened the monetary policies printed by bit the way any financial this principally gives them of the term stock market crash into which by the way would've been short-lived into the great depression. and more or less for every market crash since then the markets of course to get overvalued from time to time how should investors be reacting with that managing director. and i know your student of history. could this be on the cusp of devaluing this economic recovery
as well as the stock market is they make the wrong moves here. >> they have to thread the needle carefully here. so far they've accomplished with a set up to do. doing a good job really we are at take off in the economy. the problem now is that the market starting to fear the fed is falling behind the curve in terms of interest rates and inflation and will have to raise rates rapidly in the future which we do exactly what you said, it would force an economic recovery. and possibly create another recession. but but but they have to do your is keep money easy enough and long enough to get us through this final weakness and employment. and yet let the markets know if there on the case they are watching inflation and the recognize the reality of improving the economy is there thinking about changing their posture because any time to start signaling the rockets gradually and that we understand what is going on and we see the
fears and the markets and we see the rising rates we see the rising inflation. and were not ignoring it that is the thing. he asked to do business press conferences imperative and at the end of the press conference, the treasury goes to 17, one of the field. charles: great, i'm glad you gave us that barometer. and going back to the original act of how it was interpreted initially that first major crisis, 5000 now which is potentially the market, turning it two times to the cdp and by far this is the most is ever traded above gdp rated is that too expensive and doesn't point to an economy geared more towards equity prices and maybe commerce or industry. >> i think the stock market actually reflecting an economy that does very well that is about to explode in interest rates are low.
and i don't think that that's an appropriately priced or inappropriately advocating in front capitol and the key here is to be the middle ground going forward it in the market has confidence in the economy has legs because interest rates and inflation are at appropriate levels in interest levels are not too low relative to inflation is going to be rated. jim: the problem is how the inflation is going to accelerate through the summer and then decelerate and you might have period of uncertainty here as to whether powell is right or wrong but i tell you with this boy to you come you just said it, profits there just going to be explosive and i think that the power of profits will overwhelm a fear of that interest rate and inflation. a. charles: unless you brought that up. by the way, i mentioned the inflation but the core inflation to your point going up to 2.2 percent and they initially
saw 1.8 percent and then back down to 2 percent. we are ready now the chairman jerome powell said they can run about 2 percent prior long time. i have a minute to go but i need you to have one more thing from you. we know the user rising and hopefully they won't hit 1.7 investors are low overall to get out of the stock so they been rotating. right now other industrial names. is it time to completely walk away from something like technology. i see them getting into a sweet spot but a lot of folks on wall street is saying that run is over for good printed. jim: no i don't think so. i think it is time to lay back into any of these quality technology companies with earnings in here and now. you and have a situation here where you going to have slightly higher in inflations and taxes and slightly lower next year in the combination is a rotation back out of value some into growth. i think the short term the value will continue to run based on
momentum. this really is a terrific opportunity to get back into some of these pro stocks. charles: jim, we always appreciate you and thank you very much printed. jim: thank you. charles: you have heard of the fence plot right pretty for the term for a while now. it is designed to communicate potential changes in policy. now the efforts as his critics but is now really crucial part of this gathering and today is more important than ever. here's the thing, 18 members of the - on that . plot 11 of them are voting members in any given time. back in december, five of them signaled the likelihood of the race would go higher in 2023. so any of these at zero - 0.25. and also meant that one person has defected and a lot of people were worried there would be more
defection. there were more defections but not enough to shift this tone of the federal reserve, from the hawkish to the got fish. i think that we have seven members now above the rate hike in 2023. podesta less than half of the 18 members and for to see if i can 2022 in that plot is extremely important and was a big victory today. and for the chairman jerome powell. other things he has to win today and communicate so that wall street feels a lot better about what they're saying. you see markets edging higher been wandering into and two of my very favorite market guess because they really know their stuff. danielle embraces with us as well. so let's get right into this prayed danielle, what is jerome powell have to do to push back
against these rising yields is more the anxiety out there and let's face it, he can fall off what is trying to pull off. >> will jerome powell can articulate what is in the plot if he anticipates this really going to be picking up in the coming months, he applauds up because that's going to take care of the biggest problem on his hands the fact that he still sees an overhanging from the pandemic. it. danielle: that there are still millions of americans that constitute when economists call black and he wants to be reabsorbed and he wants these unemployed workers not to be unemployment insurance through the september deadline. he does not want for that to be, he was to see permanent job creations. that's where his focus is going to be but he's going to be able to file back on that insight until i see that, appropriate stance will stay as it has an by the way, as you just said, i met the majority of my team still on my side. charles: i know that was good,
normally oh block of the pharma stocks would shift, that the rest of the team abandoned the gold and certainly would be for jerome powell to pull this off. what he think he will say in a few become what you think he should say to the stock markets. danielle: i think what you need to do in a few moments, and the markets calling, to see hard articulate about why he does need some inflation creeping in and why it is not enough to change as your announcing both in the chatter around it from the feds predict there will not change with the fed is doing and will keep rates at zero until at least 2023 as were indicating. keep going in a $120 billion in purchases. and it is likely that if he pulls off and articulately, and separates the idea of getting to a better employment regardless of what inflation isn't creeping up up or indicating to be. they might buy some more bodice
and up five or ten year area as part of the current to be a part of the operation twist to give the markets and confidence. and able to articulate that well, the last time around. charles: instances gathering, this week has been interesting. we see oil coming down by four or five days in a row. we have big economic data points missed by a mile. retail sales been an absolute must. and this morning permits plunge prayed danielle this seems like it should be able to help jerome powell the nature of inflation but also it seems like giving him an excuse if they want to be more accommodative. i'm sure that they've gotta come up in the q&a. danielle: it will come up in the q&a and what jerome powell will allude to is the prosperous. $242 billion is already get the u.s. household accounts printed that is going to be a force and of itself.
it will push it up airline tickets and hotel fares that is going to be able to stay that these forces in the interest rates such as housing are already reacting to a slightly tighter financial conditions. higher mortgage rates and again, that will buy him more room and saying that i can be patient, be patient with me as we said, if you want to build the markets and we can certainly extend a majority of that purchase a little bit and try to bring down the tenure rate in such a focal point and it was pushing 170 today. jerome powell's worst nightmare is to have the sudden large moves in the bond market. it is not going to the bond yield pickup fully because of pricing concerns, the reflection economy that is slowly healing itself. but not enough to generate inflation. charles: okay, i have 30 seconds before jerome powell speaks. i give you the last word here in particular any rates at zero and
of course he wants right now the way he saying things working half. >> i think rates are going to be at zero. there at 047 years. after the crisis in 2008 they absolutely can say at zero can maneuver and on parts of the curve and they want to select and target as part of that purchasing program for the years to come. >> a full year since the pandemic arrived with force on our shores. looking back, it was clear that addressing a fast-moving global pandemic will be plainly and primarily through trauma of healthcare providers and experts. we are grateful to them and to all of the essential workers for their service and sacrifice. the danger to the u.s. economy was also clear, congress provided by far the fastest and largest response to any postwar economic downturn.
powell: offering fiscal support for households businesses, healthcare providers in the state and local governments. here the federal reserve, we rapidly deployed our full range of tools to provide relief instability to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy. strongly committed to achieving the monitor policy goals the congress has given us. maximum employment and price stability. the economic fallout has been real and widespread. with the benefits of perspective we can say that some of the very worst economic outcomes have been avoided by swift and forceful actions. from congress to across government and in cities and towns across the country. more people held onto their jobs and more businesses get the doors open, and more incomes were saved as a result of the swift and forceful policy actions. and while we welcome these positive developments, no one to be complacent.
at the fed, we will continue to provide the economy the support that it needs for as long as it takes. today, they kept interest rates near zero and maintain our sizable asset purchases. these measures along with our strong guidance on interest rates and on our balance sheet will ensure the monetary policy were continue to deliver powerful support of the economy into the recovery is complete. the path of the economy continues to depend significantly upon the course of the virus in the measures undertaking to control it spread. since january, the number of new cases in hospitalizations and deaths has fallen. ongoing vaccinations offer hope for a return to mark normal conditions later this year. in the meantime, continued observance of social distancing measures and wearing a mask will help us reach that goal as soon as possible. economic recovery remains uneven and far from complete and that ahead remains uncertain.
following the moderation in the case of the recovery that began towards the end of last year, indicators have been economic activity and implement have turned up recently. although the sectors of the economy most adversely affected by the resurgence of the virus, and by greater social distancing remaining week. household spending on goods has risen notably so far this year. in contrast, household spending on services remained low especially in service events typically requiring people together closely including travel and hospitality. the housing sector has more than fully recovered from the downturn while business investments in manufacturing productions also picked up. the overall recovery in economic activity since last spring is importantly to unprecedented fiscal monitoring policy actions. they have provided essential support to households businesses and communities. recovery has progressed more quickly in the general expected. in forecast from participants full economic growth this year
been revised of notably since our december summary of economic projections. and the stronger outlooks, participants noted progress on vaccinations as well as recent fiscal policy. as with overall economic activity, the conditions in the labor market have turned up recently. employment rose by 379,000 in february as a leisure and hospitality sector recouped about two thirds of the jobs that were lost in december and january. nonetheless, employment in the sector is more than $3m blows level at the onset of the pandemic. when the economy as a whole employment is 9.5 million below is pre- pandemic level of the unemployment rate remains elevated at 6.2 percent in february this figure understates the shortfall in employment articulate as participation in the labor markets remains notably below pre- pandemic levels. looking ahead, participants in
projecting implement rates to decline. the median projection is .5 percent at the end of this year and moves down to 3.5 percent by the end of 2023. the economic downturn has not fallen equally on all americans and those least able to share the burden has been hardest hit printed in particular, the high levels of joblessness has been especially severe for lower wage workers in the service sector. and for african-americans and hispanics pretty economic dislocation has abandoned any lives and created great uncertainty about the future. overall inflation remains below are 2 percent longer objective. over the next few months, twelve-month measures of inflation will move up as a very low from march into april of last year fall out of the calculation. beyond these effects we could also see upward pressure on prices spending rebounds quickly as the economy continues to reopen. particularly if supplies bottlenecks limit how quickly
production can respond in the near term. however, these one-time increases in prices are likely to have only transient effects on inflation. the median inflation protects participants is 2.4 percent this year and declined to the 2 percent next year before coming back up by the end of 2023 read the fans response to this crisis have been guided by our mandate to promote maximum employment and stable prices for the american people along with r responsibility to promote the financial ability of the financial system. as we see in her statement on longer front goals and monetary policy strategies, maximum employment as a broad-based inclusive goal. our ability to achieve maximum employment in the years and depends importantly on any longer-term inflation expectations well anchored it 2 percent. as a committee reiterated today's policy statement, with inflation running persistently below 2 percent, we will name to
achieve inflation moderately about 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. we expect to maintain and accommodate his stance of monitoring policies until these employment and inflation outcomes are achieved. with regard to interest rates, we continue to expect it will be appropriate to maintain the current zero - one quarter percent target range until labor market conditions have reach levels consistent with the committee's assessment of maximum employment and inflation has risen in 2 percent and is on track to moderately exceed 2 percent for some time. i would method a transitory rise in inflation above 2 percent has seems likely to occur this year. he would not meet the standard. in addition we will continue to increase our holdings of treasury securities violates $80 million per month and i'm agency mortgage attack securities by $40 billion per month.
until substantial further progress has been made towards our maximum employment and price stability goals. the increase in our balance sheet since last march as material used in financial conditions and is providing substantial support in the economy economy is a long way from our employment and inflation goals is likely to take some time for substantial further progress to be achieved. our forward guidance of the funds ride-a-long with her balance sheet guidance, will ensure that the stanza monetary policy remain highly accommodative as a recovery progressives. our guidance is outcome based and will tie to the path of the federal funds rate and the balance sheet to progress towards reaching our employment and inflation goals. overall, our interest rate and balance sheet tools are providing powerful support to the economy will continue to do so. to conclude, we understand their actions affect communities families and businesses across the country. everything we do is in service to our public.
they're committed to using our full range of tools to support the economy and help assure that the recovery from this difficult. we'll be as robust as possible read thank you and look forward to your questions. >> audience pretty. >> hi and thank you for that predict so can you talk us through how this forecast for 2021 goes into the progress definition of 2.4 percent inflation. understand that's considered and while progress of four and a half percent unemployment. it is time start talking about this yet. powell: not yet. i can pull the data. we have said that we would
continue asset purchases at the space. and until we see substantial further progress. this actual progress, not forecast project entered progress. this difference from a our past approach. what we mean by that is pretty straightforward, the labor markets have moved it and conditions have moved and made substantial progress towards maximum employment and inflation is made essential progress towards the 2 percent goal. that's what we're going to want to see. now obviously that includes judgment and when we see, will be carefully looking ahead and we also understand the week will want to provide as much advance notice of any potential as possible so that when we see when we are on track and not actual data coming in the suggest that we are on track, to have perhaps achieved further progress. and we will say something and we will say so well in advance of any decision to actually taper. reporter: if i can follow up on
that this shift in the dock, why wouldn't that suggest awakening of the commitment. enough a lot of people shifted into 2022 it seems. powell: i don't see that it all. we have a range of perspectives and i welcome that. and we debate things and we always come together around a solution. but this strong bulk of the committee is not showing a rate increase during this forecast period. and you know, as the data improves and the outlook improves, very significantly see the december meeting you would expect forecast to move up and probably not surprised that some people would bring in their estimate of the appropriate time for liftoff. nonetheless, the book of the committee and the largest are by far, the committee is does not show a rate increase during this period and again part of that is wanting to see actual data.
rather than just a forecast at this point. we do expect that we will begin debates faster progress on spending and labor markets and inflation as the year goes on because of the progress with the vaccine and because of the support we are getting. expected to happen but we will have to see it first. reporter: thank you. victoria. reporter: high chair jerome powell. i want to talk about the ratio, there's been a lot of talk about what you're going to do this month. i'm happy to hear an update if you have one. one more broadly, do you think long-term that the leverage ratio poses problems for implementing monetary policies and reserve supply will remain barge. and if so do you think the changes to the levers of meeting the way to deal with the problem targeted. powell: we will have something
to announce on that in the coming days. i'm not going to expand upon your questions rated wanted to ask another question if you would like to because that when i'm just just going to say those will be answered in the coming days. reporter: okay. i'll ask about unemployment printed the rates is you all have projections for the rates but you've also been really emphasizing the fact that is not the only thing y'all are looking at, also labor force participation. are you looking at ways of maybe adding to how your projecting the unemployment rate to the economic projections. powell: let me say as we say in our longer goals and monetary strategies, range of indicators of the labor market. we never only look at an unemployment rate. is the only indicator of labor market outcomes. with the s&p and we look at a very broad range, you hear about
participation in the fact of the employment population the combination of the two. different measures of unemployment. so the wages, and the job flow and all of those things, they go into an assessment disparity of various groups. all of that goes into the assessment of maximum employment. the trying to incorporate all of those into the projections would not be practical. obviously the thing they were do include is just the unemployment rate and that is a very insufficient statistic and does not include a lot of other things that we do look at. i would not want to say that we're looking to include the other dozen things that we look at into the s&p but at time from time to time we do look at adding different things. but i would just say that the summary, one device, not going to include all of the things we look at. thinking of the things we look at we typically talk about them all of the time. so not actually looking actively
at the significantly broadening those indicators and he is happy right now. >> thank you. chris. reporter: thank you. chair jerome powell, your forecast being very low and appoint a rate next year and in 2023, if inflation overall in the s&p forecasting and function at or above 2 percent. by 2023. and you know rate hike in any of this. and of any of the forecast so you're telling us that the higher inflation rates projections or do you not as unemployment rate insufficient to work what is this doing with the action functions.
this seems like a mandate by 2023. [inaudible]. powell: i guess the first thing to say is that the s&p is not a committee forecast. it is something that we sit around and debate and discuss and approve and say this represents our reaction function as a committee. it is a compilation of projections from different people. and since we don't debated are discussing, would be hard for me to say why exactly each participant did what they were going to do. so all would say about this is that what i thank you so very clear guidance related out on liftoff. and it's really three things on the labor market conditions that are consistent with our estimates and next my appointment as mission we consider a wide range of indicators and assessing labor market conditions, not just unemployment rate. inflation is reached to present and not just from transitory basis and inflation is on track to run moderately about
2 percent for some time. the first two of those three are very much databased and so it does have a lower element have expectations in it. so we are very much determined to implement this guidance in a robust way and it is the guidance that we chose carefully to element our time work. we will need to see david to meet the standards as i mentioned. so what this s&p really say, says that we are committed to our framework in the guidance we provided implement that framework. we will wait and tell the requirements set forth in the guidance are clearly met before considering a change their policy rates. unless think that i will say is this, the state of the economy in two or three years is highly uncertain. and would not want to focus too much on the exact timing of the potential rate increase. not that far into the future. it so that's how i would think about the s&p.
>> your listening to the chairman powell. i want to bring back in phil and danielle so the market was sort of indicating danielle not sure what to do. about 236, and jay powell just reiterated it coming really hammered home on what it would take for them to hike the rates. jerome powell gave you three points over and over again, maximum employment, inflation and inflation was going to run hotter than 2 percent, for a sustained period of time. before that, he let us know that employment would be broad-based and inclusive and to me, that sounds like he keeps saying they were going to make sure that anyone rates rise and americans are lower than normal. his fun x are normal than lower. in historical times, when the fed might've hiked rates. and all of those at up to the notion that not anytime soon if
you're concerned that were not going to be accommodated, stop worrying. had you interpreted for unit. danielle: that's exactly how i interpreted it charles, doesn't really matter what he is saying about inflation if he's saying that the most reported goalpost is going to be full employment. you we know the forecast is in the form of the vicinity of 4 percent so we also know that it but until the employment rate got down to 3.5 percent, half-century low, that was when it is true inclusiveness was becoming recognized throughout the financial economic community. he is saying that is going all the way back down to those levels and that is indeed what this substantiates their assertions that they're going to keep interest rate lows for as long as it takes to get there and say what they're saying about inflation target that's his message and its' consistent message cities want to make sure
the data are not forecast pretty but actual data that are in the rearview mirror are seeing before the event makes a move. charles: two or more on the science side in the last part more maybe us. or art. you can kind of get the remaining as inflation is going to see growing. best buy is cannot and he is having trouble really seems to be frustrated as to why some members of the feds see potential hike range in 2023 but he pushed back but that become a more firmly in control that i think but i think that another issue that is having trouble with is saying yes, things are going to go up. he acknowledged that. we acknowledge these reopening's a lot of money in the system. by the way, you will see supply constraints printed but it will be temporary and wall street don't go nuts in the bottom mart
yields go up do not go nuts as the prices get a little hotter because it is only transitory. is wall street going to buy this. >> temporarily they will because the economists are saying that. charles: been temporarily. >> the reality is in one way to give himself an opportunity to let rates run hotter and he'll get what he wants for the second or third quarter. where is really going to come push and shove is in the fall. because it doesn't start to cool off and he has to stop slowing down the program all the way what he just said will come irrelevant. because inflation will remain higher entities would have to change course and deal with the participants on his committee as to where we need to raise rates or were to get runaway inflation so he bought himself time but the reality is the support what he wants and that's the real unknown here. and so far from the market is doing what we expected to do rates are going higher.
is the million-dollar question honestly nothing separated you can't print this much money and expect nothing to happen. charles: for the stock market, once it going to do, we'll go sideways or will the money continue to come out of the higher names or the more stable names. >> you're about to see the gdp of our lysis into my time. it is much as a percent this year. will have plus 12 on the s&p 500 but this is going to go back to what we are used to surreal volatility and see these inflations come balance through going to pause the marketing going to get his continuous rotation to be expensive names and you'll still do all those names in the future of our economy of any of them going to fall. thirty and 40 times and rotate towards names that are fairly inexpensive. i still like names that are going to support us in the reopening trades that may not be
as excessive as they were about a month or so ago but he still think that where the money is going to be spent his work opportunity will be. shorten the duration and the equality and your equities until towards value and you take your profits and growth and you don't eliminate it but you create balance in your portfolios with a barbell and you don't make a veteran where you going to lose and then regardless of what is going to happen your conditions for both. so the equity market for security in your portfolio. charles: daniel, and jerome powell over the last meeting, the last time we spoke over he's seen frustrated and he said listen, do you three that you all use of the financial media and wall street is useless. and doesn't take into account participation in people drop out of the labor force and so you get a low unemployment number a gazillion people are not even in the labor force predisposing like going to be leaning heavily participation rates and the flow
in the way just how quickly they are rising and things like that. is that more appropriate in your mind than just how we kind of simply say that the unemployment rate is x, y, and z using their own numbers. danielle: charles i'll be sitting down. i know you are but take my hat off to jerome powell because he is saying that you can basically drive a mack truck between what the department of labor reports every thursday morning and then apply the rates. on the headline basis as the first friday of every month party there are a lot of nuances and a lot of you mentioned more than 5 million people have dropped out. we've got the highest number of current unemployment since the great financial crisis took a very long time. i think that it is appropriate for powell to say that we are not looking at this very narrow lens of the headlines of an employment rates. but what that also means that should also communicate in the
bond market participants in particular is there going to be more patient and just waiting for some kind of a decline in the number that has the front pages of the wall street journal and new york times. so there's a deeper message there charles. charles: what about danielle, he's also saying the sort of taken aback with a question about his and almost time to start talking about talking about hiking rates and he pushback saying that the fed will let you know. they will articulate in his words, well in advance of any tapering. the market took a leg up on that but what exactly does that mean for you to really never going to be surprised pretty struggle of the stuff that by the time start hiking the race and taking away this will be want to give it up. is that what he means. danielle: and he does charles. we're sitting at the table together in december of 2018
when he said his foot in his mouth. it is probably never lived that down in his own mind but by the same token, pounding his chest by saying that he is the bulk of the committee. how any times that he did he say the book of the committee. must my team he said most are on his side and he said we will broadcast well in advance of any newspaper and you will hear it from us first. and now it's going be a matter of keeping box in line because as genteel as he makes the majority, seem around that table, right now a lot of debates going on on this market committee. charles: phil, this exemption the banks got at the start of the pandemic, and the start of the crisis the exemptions. he pause in the question but it
expires at the end of this month predict so i got about a week or if he allows it, if they extende went have to sell treasuries. where do you stand on that? >> remember, the leverage is in the system compared to what it once was, but i don't think the fed wants to create another issue for them right now. they're dealing with something they've never dealt before, trying to get unemployment down using fed policy in a way that's never been done before. so i think they're going to give him the extension. you know, to a degree lending is not in the environment right now, there's not a lot of leverage in the system. there might be some maturation in the bond system for this, but, by and large, i don't think it's today. you get a hot economy six, nine
months from now and they want to leverage really for spending and get the economy to lift off, then it becomes an issue. for that reason, they can't limit the opportunities of the growth rate, and i think they extend it. it all plays back to they're trying to do some things they've never done before, and be very cautious about playing to the unemployment market and the amount of leverage you're going to have in the banking system and what it does to the long-term growth in the u.s. economy. charles: danielle, we've got two minutes to go, less. what happens if jay powell wakes up tomorrow, and the 10-year yield has spiked yet again, and we start getting around 1.7%, is there an emergency phone call saying, guys, we've got to rethink this? >> well, it certainly depends, charles. he is following the credit markets very closely. he's been following the fact -- not the vix index. bond market volatility has become unhinged in the last few weeks. if the wheels start to fall off in the corporate bond market, something we don't talk about
very much but something that jay powell understands very, very well, you can expect for all the narrative, for as much as he's pounding the table, you could expect for that narrative to flip on a dime if something starts to go wrong in the corporate debt market in america because this is a gigantic beast that he knows from experience in late 2018 he cannot, he cannot control. and that would prompt another pivot, i don't care how adamant he is in his narrative. if the wheels fall off the credit market and it bleeds into the stock market, the fed will change it ways in a heartbeat. charles: 20 seconds, phil. if we spike tomorrow, what does the stock market do? >> the stock market's going to have a bad day, a very bad day. the price of debt, the price of earnings, the hit to earnings and the price of labor will go higher, and the stock market's going to have a very terrible time dealing with that in short order. think of what it does with the high yield market with higher rates coming in. it can't handle a rapid spike,
and for that reason the fed chair will have to pivot. charles: all right. right now, everything's moving, i think, according to best laud plans. we'll see. phil, danielle, thank you very much. folks, really important day. we're going to keep watching it because it's the reaction after these things are over that really matters. liz claman, another crazy last hour of trading. can't wait to watch. liz: this is a big one, charles. and all you have to do is look on the lower with bug here, and you can see what the s&p 500 is doing. it has jumped pretty exponentially to the breaking news, federal reserve chair jerome powell still in the middle of his news conference. we're monitoring it. the markets are seizing on this big headline. the markets were already moving off their floors, but the pop really became pronounced when powell basically said the economy and inflation levels will pretty much have to jump through hoops before the fed will even consider tapering its stimulative bond purchases,